Correlation Between Tokyo Electron and BE Semiconductor

Can any of the company-specific risk be diversified away by investing in both Tokyo Electron and BE Semiconductor at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Tokyo Electron and BE Semiconductor into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Tokyo Electron Ltd and BE Semiconductor Industries, you can compare the effects of market volatilities on Tokyo Electron and BE Semiconductor and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Tokyo Electron with a short position of BE Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tokyo Electron and BE Semiconductor.

Diversification Opportunities for Tokyo Electron and BE Semiconductor

0.62

Correlation Coefficient

Tokyo Electron  BE Semiconductor

Poor diversification

The 3 months correlation between Tokyo and BESIY is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Tokyo Electron Ltd and BE Semiconductor Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BE Semiconductor Ind and Tokyo Electron is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Tokyo Electron Ltd are associated (or correlated) with BE Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BE Semiconductor Ind has no effect on the direction of Tokyo Electron i.e., Tokyo Electron and BE Semiconductor go up and down completely randomly.

Pair Corralation between Tokyo Electron and BE Semiconductor

Assuming the 90 days horizon Tokyo Electron is expected to generate 1.05 times less return on investment than BE Semiconductor. But when comparing it to its historical volatility, Tokyo Electron Ltd is 1.01 times less risky than BE Semiconductor. It trades about 0.03 of its potential returns per unit of risk. BE Semiconductor Industries is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  9,192  in BE Semiconductor Industries on August 31, 2024 and sell it today you would earn a total of  2,263  from holding BE Semiconductor Industries or generate 24.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Tokyo Electron Ltd  vs.  BE Semiconductor Industries

Tokyo Electron

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tokyo Electron Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's essential indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

BE Semiconductor Ind

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BE Semiconductor Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong forward indicators, BE Semiconductor is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Tokyo Electron and BE Semiconductor

The main advantage of trading using opposite Tokyo Electron and BE Semiconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tokyo Electron position performs unexpectedly, BE Semiconductor can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in BE Semiconductor will offset losses from the drop in BE Semiconductor's long position.

The idea behind Tokyo Electron Ltd and BE Semiconductor Industries pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.